BILL ANALYSIS Ó
AB 654
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Date of Hearing: April 29, 2015
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
Ed Chau, Chair
AB 654
(Brown) - As Amended April 22, 2015
SUBJECT: Redevelopment: revenues from property tax override
rates
SUMMARY: Enacts provisions that would allow revenues from a
voter-approved property tax in support of a State Water Project
to be allocated to the city or county whose voters approved the
tax, in specified conditions. Specifically, this bill:
1)Finds and declares all of the following:
a) The California Constitution limits property-based tax
levies, with exceptions to these limits only when a local
jurisdiction obtains the approval of its voting electorate
to use additional property-based tax levies for specific
purposes approved by the voting electorate, in accordance
with applicable constitutional and statutory provisions.
b) With the enactment of AB 26 X1 (Blumenfield), Chapter 5,
Statutes of 2011-12 First Extraordinary Session, the
Legislature intended that, upon dissolution of
redevelopment agency (RDAs) in the State of California,
property taxes that would have been allocated to RDAs are
no longer deemed tax increment.
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c) It is the intent of the Legislature in enacting this act
to do all of the following:
i) If an RDA had previously pledged revenues derived
from the imposition of a property tax rate, approved by
the voters of a city, county, or city and county to make
payments in support of a State Water Project and levied
in addition to the property tax rate limited by the
California Constitution, to pay a portion of the debt
service due on indebtedness incurred by the former RDA on
an approved Recognized Obligation Payment Schedule
(ROPS), then the successor agency shall continue to
pledge those revenues, in a commensurate rate going
forward. For example, if revenues derived from a State
Water Project approved by the voters of a city, county,
or city and county were pledged to pay up to 25% of the
annual debt service for the indebtedness approved in a
ROPS, the successor agency shall continue to pay up to
25% of the annual debt service on the indebtedness until
maturity. Any and all excess pledged revenues derived
from the State Water Project that are not necessary to
pay the debt service on the indebtedness shall be
allocated and paid to the city, county, or city and
county whose voters approved the State Water Project
property tax rate;
ii) Ensure that the use of revenues derived from the
imposition of a property tax rate approved by the voters
of a city, county, or city and county, to make payments
in support of State Water Projects and levied in addition
to the property tax rate limited by the California
Constitution, is consistent with the use approved by the
voters of a city, county, or city and county, once
revenues from such property tax rates are not needed to
pay approved indebtedness of a former RDA;
iii) Implement the allocation and distribution of
voter-approved, property-based tax revenues for State
Water Projects under the RDA dissolution process in a
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manner that would have been consistent with the
allocation and distribution of those revenues had RDAs
not been dissolved, in accordance with applicable
constitutional provisions; and,
iv) It is the intent of the Legislature that this act
not affect any property tax allocations that occurred
prior to an unspecified date.
2)Requires the county auditor-controller, prior to allocating
moneys in each Redevelopment Property Tax Trust Fund (RPTTF)
pursuant to the specified formula in existing law, to
additionally deduct the revenues allocated as follows:
a) On January 2, 2016, and each January 2 and June 1
thereafter, to a city or county that levies a property tax
rate, approved by the voters of a city or county to make
payments in support of a State Water Project and levied in
addition to the property tax rate limited by the California
Constitution, an amount of property tax revenues equal to
the amount of revenues derived from the imposition of that
tax rate that were allocated to the RPTTF for that fiscal
period. Provides that this paragraph shall not apply to
the extent that revenues derived from the imposition of a
property tax rate are not deposited into a RPTTF as
provided by 3) through 6) below.
3)Allows a city or county that levies a property tax rate,
approved by the voters of a city or county to make payments in
support of a State Water Project and levied in addition to the
property tax rate limited by the California Constitution, to
make a request to an oversight board to prohibit revenues
derived from the imposition of that property tax rate from
being deposited into an RPTTF.
4)Provides, based on substantial evidence that a former RDA made
a pledge of revenues that specifically included revenues
derived from the imposition of a property tax rate, approved
by the voters of a city or county to make payments in support
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of a State Water Project and levied in addition to the
property tax rate limited by the California Constitution, that
an oversight board may deny a request pursuant to 3), above,
in an amount not to exceed the amount of revenues pledged by
the former RDA.
5)Provides, notwithstanding any other law, for the 2015-16
fiscal year and each fiscal year thereafter, except to the
extent an oversight board denies a request as provided in 4),
above, that any revenues derived from the imposition of a
property tax rate, approved by the voters of a city or county
to make payments in support of a State Water Project and
levied in addition to the property tax rate limited by the
California Constitution, shall not be allocated to an RPTTF,
and shall instead, be allocated to, and when collected shall
be paid into, the fund of the city or county whose voters
approved the tax.
6)Provides, notwithstanding any other law, all allocations of
revenues derived from the imposition of a property tax rate,
approved by the voters of a city or county to make payments in
support of a State Water Project and levied in addition to the
property tax rate limited by the California Constitution, made
by any county auditor-controller prior to July 1, 2015, shall
be deemed correct and shall not be affected by this bill.
Provides that a city, county, county auditor-controller,
successor agency, or affected taxing entity shall not be
subject to any claim for money, damages, or reallocated
revenues based on any allocation of such revenues prior to an
unspecified date.
7)Provides that reimbursement to local agencies and school
districts shall be made, if the Commission on State Mandates
determines that this act contains costs mandated by the state.
EXISTING LAW:
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1)Dissolves RDAs and institutes a process for winding down their
activities.
2)Defines "enforceable obligations."
3)Requires successor agencies to make payments due on
enforceable obligations, as specified.
4)Requires successor agencies to prepare a ROPS, before each
six-month fiscal period, in accordance with specified
requirements, and requires the schedule to identify one or
more
of the following sources of payment:
a) Low- and Moderate-Income Housing Fund;
b) Bond proceeds;
c) Reserve balances;
d) Administrative cost allowance;
e) The RPTTF, as specified; and,
f) Other revenue sources, including rents, concessions,
asset sale proceeds, interest earnings, and any other
revenues derived from the former redevelopment agency, as
approved by the oversight board.
5)Requires each successor agency to have an oversight board of
seven members to approve certain actions of the successor
agency.
6)Requires the Department of Finance (DOF) to review the actions
of an oversight board.
7)Requires DOF to issue a finding of completion to the successor
agency, within five business days, once the following
conditions have been met and verified:
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a) The successor agency has paid the full amount as
determined during the due diligence reviews and the county
auditor-controller has reported those payments to DOF;
b) The successor agency has paid the full amount as
determined during the July True-up process; or,
c) The successor agency has paid the full amount upon a
final judicial determination of the amounts due and
confirmation that those amounts have been paid by the
county auditor-controller.
8)Allows the successor agency, upon receiving the finding of
completion, to:
a) Retain dissolved RDA assets;
b) Place loan agreements between the former RDA and
sponsoring entity on the ROPS, as an enforceable
obligation, provided the oversight board makes a finding
that the loan was for legitimate redevelopment purposes;
and,
c) Utilize proceeds derived from bonds issued prior to
January 1, 2011, in a manner consistent with the original
bond covenants.
9)Requires, after DOF issues a finding of completion, the
successor agency to prepare a long-range property management
plan that addresses the disposition and use of the real
properties of the former redevelopment agency, and requires
the report to be submitted to the oversight board and DOF for
approval no later than six months following the issuance to
the successor agency of the finding of completion.
10)Limits property tax to 1% except for specific bonded debt,
pursuant to the California Constitution.
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FISCAL EFFECT: Unknown.
COMMENTS:
Background : Under redevelopment law, RDAs created project areas
that captured incremental property tax growth within the project
areas. RDAs collected the increase in property tax that would
otherwise have gone to cities, counties, special districts, and
schools. To alleviate the fiscal burden of redevelopment, RDAs
entered into pass through payments with other local taxing
entities out of tax increment it collected. Under RDA
dissolution, RDAs no longer pass on the tax increment growth to
pay pass through agreements. This is because property tax
increment is no longer allocated to RDAs. Instead, a county
auditor-controller deposits former RDA property tax increment,
including tax increment into a trust fund. After deducting a
share of the tax increment for its administrative cost, the
auditor-controller uses the revenues deposited into the trust
fund to pay the following 1) pass through payments, 2)
enforceable obligations of the RDA, and 3) successor agencies
administrative costs. Remaining revenues are then distributed
to the other local governments whose jurisdiction overlaps with
the former RDA based on each local government's share of the 1%
property tax.
In the 1960s, the voters of San Bernardino County approved a tax
increase to fund State Water Projects in the county. After the
creation of redevelopment, the Valley Municipal Water District
(Valley District) entered into pass through agreements with the
RDAs to receive in some cases a portion and in other cases all
the property taxes they would have received pre-redevelopment.
According to the sponsor, Valley District had 23 negotiated
agreements with ten RDAs for project areas throughout its
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service area. Although Valley District is receiving a portion of
the payment, Valley District indicates that it is not receiving
its entire pass through payment and is entitled to an additional
$10 million which is being distributed by the San Bernardino
county-auditor to other taxing entities out of the residual
balance remaining after all the obligations of the RDA are paid.
This bill would authorize a city or county that levies a
property tax rate, approved by the voters of a city or county to
make payments in support of a State Water Project and levied in
addition to the general property tax rate, to make a request to
an oversight board to prohibit revenues derived from that
property tax rate from being deposited into a Redevelopment
Property Tax Fund. This bill would authorize an oversight board
to deny this request based on substantial evidence that a former
RDA made a pledge of revenues that specifically included
revenues derived from the imposition of that property tax rate.
This bill, for the 2015-16 fiscal year and each fiscal year
thereafter, except to the extent an oversight board denies a
request, would prohibit any revenues derived from the imposition
of that property tax rate from being allocated to an RPTTF, and
would, instead, require these revenues to be allocated to, and
when collected to be paid into, the fund of the city or county
whose voters approved the tax.
This bill would require all allocations of revenues derived from
the imposition of that property tax rate made by any county
auditor-controller prior to an unspecified date to be deemed
correct, and would prohibit any city, county, county
auditor-controller, successor agency, or affected taxing entity
from being subject to any claim, as specified. This bill would
require, to the extent that revenues derived from the imposition
of a property tax rate, approved by the voters of a city or
county to make payments in support of State Water Projects and
levied in addition to the general property tax rate, are
deposited into an RPTTF, the county-auditor controller to
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allocate moneys from each RPTTF to a city or county that levies
a property tax as so described after certain other allocations
have been made.
Purpose of this bill : According to the author, "AB 654 would
remedy the situation in which the revenues derived from the
voter-approved property tax overrides are being misallocated in
the course of the RDA dissolution process in the County of San
Bernardino. Currently, the San Bernardino County
auditor-controller is allocating the residual balances from each
former RPTTF to taxing agencies based on each agency's share of
the 1% county general tax levy without taking into account any
specific debt service override tax including Valley District.
This results in Valley District debt service tax override
proceeds that are not needed for payment of approved former RDA
expenses to be allocated out to all taxing entities ignoring
that a certain portion of that residual balance was derived
directly from Valley District's tax override rate.
Staff comments : Committee staff is not clear how many State
Water Projects there are in the state that have pass through
agreements with former RDAs and could qualify for additional tax
revenues under this bill. The sponsor has indicated that the
pass through agreements it had with RDAs in San Bernardino
County are unique. The committee also may wish to consider that
by prioritizing Valley District and potentially other unknown
State Water Projects to receive more property taxes from a RPTTF
than is specified by their pass through agreements, other taxing
entities will not be receiving as much in residual receipts.
Those property taxes could go toward the city and county to pay
for services and in some cases cities have set up "boomerang
funds" to direct property taxes toward affordable housing
activities.
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Future amendments : The author needs to add a date by which a
county auditor-controller must deem as correct the allocation of
revenues derived from the imposition of the State Water Project
property tax rate. The author is aware this needs to be
addressed and plans to amend the bill to add the date July 1,
2015 in the next committee.
Double-referred : This bill was double referred to the Committee
on Local Government, where it will be heard should it pass out
of this committee.
REGISTERED SUPPORT / OPPOSITION:
Support
San Bernardino Valley Municipal Water District (sponsor)
East Valley Water District
Opposition
AB 654
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None on file.
Analysis Prepared by:Lisa Engel / H. & C.D. / (916) 319-2085